PensionPro

The cash back is *not* turned into pre-tax contributions. What happens is, when you make a purchase that qualifies you for a rebate, savernaton accesses your 401(k) deferral "system" to increase your deferral by the amount of the rebate. The rebate is deposited into your checking account - and that deposit "offsets" the increase in your deferral amount. It's a simple (or not so simple) way to increase your deferrals in an amount that should be painless because it is offset by the rebate. Of course, you have to spend money to generate the rebate to begin with. Thanks for the explanation. The marketing language threw me off a little: "SaverNation gives employees cash back for their normal monthly purchases and automatically converts it to extra pre-tax 401(k) contributions."

There was a recent NAPA article ( http://www.napa-net.org/news/managing-a-pr...r-opener-ever/) which cited big names such as Brian Graff, James Holland, Bruce Ashton, Dallas Salisbury, etc. The idea is that an online retail portal called Savernation would convert cash back rebate on purchases to pre-tax 401(k) or IRA contributions. Anyone heard of this concept or know how this works? Thanks.

10/15/2012

ESOP Guy: you are correct, it relates more to employment law than pension law. For the most part we rely on our clients' HR Dept to make the determination of employment status. However, there are times when we have to probe further and it helps to ask the right questions. Your insights are appreciated. The issue here is the employee has been on-call for two years but has not worked or been called or paid during the time frame.

If he has not terminated employment, I don't think he has reached his RBD. I am not aware of a minimum hours rule for this purpose. And before someone points out that this could easily be manipulated, yes it could, but the key is really is this person truly on call or is it simply an attempt to avoid taking the distribution. There is no intent in this case to skirt the rules, merely a desire to know and follow the rules. My initial reaction is the same as yours - as long as the employment relationship exists RBD has not been attained.

I have a senior management employee over 70 1/2, no ownership in the plan sponsor. He is not actively employed, but he is on-call and works on certain projects. In some years there is not work for him. He has NOT been formally terminated. Must be receive his minimum distributions? Thank you!

We have the same situation in a 401(k) plan. Any ideas?

Similar situation: plan terminated and trust zeroed out. TPA discovers late deposits. In order to correct late 401(k) deposits, plan SHOULD pay dollar or two late interests to a number of participants in this large plan. It does not seem to be worth the cost of opening accounts, processing distributions, and issuing 1099-Rs. Any suggestions and opinions out there? Thanks.

http://www.irs.gov/Retirement-Plans/Tax-Co...isqualification

1. No federal or state law requires an employer to provide sick pay. 2. It may be paid by either the employer or a third party, such as an insurance company.

The question of fingerprinting is a matter of state law. I believe some states prohibit fingerprinting of employees subject to certain exceptions. The underlying question is one of human relations, the answer for which is usually found in honest communication.

If plan passes 410(b) it does not invoke 410(b) failsafe. May want to check with consultant how 410(b) failsafe applies to 401(a)(4) failure.

Plan doc provides nonelective contribution by payroll. Employer makes miscalculation and does not withhold 401(k) deferrals or make nonelective contribution for a couple of employees. Error is discovered 3 months later. Employer is restoring lost earnings on the 401(k) deferrals. Do they need to restore lost earnings on the nonelective contribution? Thanks for your replies!

It is considered a new plan since it is not a successor plan. A newly established plan (other than a successor plan within the meaning of §1.401(k)–2©(2)(iii)) will not be treated as violating the requirements of this paragraph (e) merely because the plan year is less than 12 months, provided that the plan year is at least 3 months long.

Thanks, Tom, your response is appreciated!

We are reporting Code A participants who have deferred vested benefits and have not been previously reported for a 403(b) plan whose assets are invested in annuities. The plan allows distribution in the form of lumpsum, instalments or annuities. Under line 9d (annuity code) I am using code A (a single sum) and under line 9e (payment code) I am using code A (lump sum). I notice that another practitioner is using code G (J&S) and code B (annually) respectively. What is the right way? Thanks for your opinions and comments!

The health insurance premiums are includible as plan compensation. These amounts are W-2 compensation. Heath and accident insurance premiums paid on behalf of the greater than two percent S corporation shareholder-employee are wages for income tax withholding purposes on the shareholder-employee’s Form W-2. These benefits are not subject to Social Security or Medicare (FICA) or Unemployment (FUTA) taxes.

Only if they are in the individual account of a participant or beneficiary over which the participant or beneficiary has the opportunity to exercise control and with respect to which the participant or beneficiary is furnished, at least annually, a statement from a regulated financial institution describing the assets held (or issued by) such institution.

Here is my opinion, and it is okay to disagree: The invoice is stale (since it has been paid and no longer outstanding) so it can not be the basis for the hardship. If a plan administrator is okay with stale invoices, will they accept an invoice that is 5 or 10 years old simply because it is for a qualifying expense? As far as the funeral expense causing the other hardship that is a quote from the OP: "Making the payment has caused hardship." I believe the administrator may have leeway if the employee had to borrow funds to pay the funeral expenses and is requesting a distribution to repay that loan. I don't know that is the case because the only facts we have here are what the OP is giving us.

Plan needs to be safe harbor for entire year to qualify for top heavy exemption. You can amend the plan with 30 days notice to reduce or eliminate the SH match, and apply ADP and ACP tests for the entire year. The match is counted as top heavy contributions. If an employer terminates a SH plan mid-year due to financial hardship or a corporate transaction, the plan retains SH status for the short year.

There are two discrete questions to consider: 1) Is there an immediate and heavy financial hardship? If the plan uses the safe harbor definition for this determination "a distribution is deemed to be on account of an immediate and heavy financial need of the employee if the distribution is for ... payments for burial or funeral expenses for the employee's deceased parent, spouse, children or dependents." Reading the language of the regs my interpretation is that this distribution is NOT for payment for burial expenses as represented by the OP. The key I believe is the employee needs to furnish a current invoice from the funeral home. 2) Is the hardship distribution necessary to satisfy the need? My interpretation is that there is not an immediate and heavy financial need. However, if one believes otherwise and uses the safe harbor definition for this determination then you only have to make sure the distribution does not exceed the hardship amount and the employee has received other loans/distributions from the plan. It does not seem the funeral expenses are the hardship. Incurring the funeral expenses has caused other financial hardship. The question is, is this other hardship an immediate and heavy financial need? Of course we would not be discussing any of this if the participant did not attach a check to the application!

I agree. A distribution is not considered necessary to satisfy an immediate and heavy financial need of an employee if the employee has other resources available to meet the need.

The DOL investigation increases the likelihood of a claim so the safe option is to notify the insurance company. What is the downside? Btw, it is worth exploring what if anything triggered the investigation.

Thanks for all of the helpful responses. Based on K2retire's post I will follow up with the client to find out exact nature of retirement assets.

A couple of questions came up in talking to a client that I thought someone on this forum would know: 1) Does having retirement assets reduce eligibility for social security benefits? 2) Does receiving an income stream (such as annuity payments) from retirement assets reduce eligibility for social security benefits? Appreciate your insight into one or both questions.